Commentary: Financial sector transformation map checks three key boxes

SINGAPORE: As global competition intensifies, and technological disruption reshapes entire industries, one thing is clear – it is no longer business-as-usual.

Recognising this, at Budget 2016, the Singapore Government announced that to ensure the continued growth and competitiveness of the economy, enterprise-level support on its own was no longer sufficient.

Instead, growth strategies had to be developed for each industry in order to position us well for the future. Industry Transformation Maps (ITMs) covering 23 industries, or 80 per cent of Singapore’s GDP, were created.

Having been closely involved in a number of ITMs these last two years, what is evident to me is that for an ITM to be effective, it must satisfy a few conditions. They include:

• A high degree of private-sector participation, helping to create ownership and focus
• Rollout of well-orchestrated industry-level iconic projects, to align participants
• Strong focus on people and skills agenda

The financial services ITM checks the box on all three.

PRIVATE SECTOR INVOLVEMENT AND FOCUS

For a start, the financial services ITM has strong industry participation, driven by the Financial Centre Advisory Panel (under the aegis of the Monetary Authority of Singapore (MAS)) comprising members from banks, asset managers, and insurers. 

This has allowed us to zero in on principal businesses where future opportunities lie. Singapore’s financial services ITM has, as focus areas, wealth management, asset management, foreign exchange, infrastructure finance, capital raising and insurance. 

In addition to selecting focus areas, the ITM also creates a clear focus on the innovation agenda. This covers a range of technologies in payments, blockchain and APIs.

READ: A commentary on the technological disruption facing Singapore’s financial sector.

ICONIC INDUSTRY PROJECTS

Second, some key iconic projects have been identified to anchor the transformation. High-level government support is crucial to enabling iconic projects to take off, and this has indeed been forthcoming.

Marquee projects also open up opportunities for non-traditional players such as technology companies to participate by providing solution sets.

The financial sector has done well in this regard, with strong public-private partnership facilitating the rollout of a number of path-breaking initiatives in the last two years in four areas:

1. Creation of a common set of API standards. Banks have traditionally operated as pipe companies, facilitating money flows in the global monetary system. As we go forward, however, banks need to make the shift from being a pipe company to becoming a platform company, with banking seamlessly integrated into the daily lives of customers. API technology enables this.

As we transition from a traditional to API economy, it is helpful for the industry to have a framework by which to think about new ecosystem-based business models. It is also important to be guided by a common set of standards.

The API playbook, launched in November 2016, meets this need. Developed by The Association of Banks in Singapore (ABS) and MAS, together with the industry, the playbook identifies common and useful APIs for industry and non-industry players. 

It also provides guidance on information security standards and governance models.

In November 2017, DBS launched a banking API developer platform with over 155 APIs across more than 20 categories: Funds transfers, rewards, PayLah! and real-time payments. 

At the time, more than 50 companies including AIG, McDonald’s, MSIG and PropertyGuru had already tapped into the DBS API platform to develop solutions which bring convenience and value to our customers.

2. Establishment of a common Know-Your-Customer (KYC) utility. Over the years, Singapore has solidified its reputation as a trusted international financial centre. As criminals become smarter and more sophisticated, however, banks need to step up their ability to detect illicit activity. This includes being able to identify clients of a dubious nature at the onboarding stage. 

To facilitate this, one initiative in the works is a common KYC utility. Performing due diligence on potential clients can be a time-consuming and laborious activity. If the load can be shared across the industry, this will allow banks to focus their efforts on more complex aspects of customer due diligence or transaction monitoring. KYC processes will be strengthened.

Customers could also save time, as they need not provide the same information to multiple institutions.

This initiative is led by ABS, and involves multiple financial institutions, government agencies, MAS and external vendors. The coming together of an entire ecosystem is required to drive material change.

3. Experimenting with distributed ledger technology across payments and trade finance. Distributed ledger, or blockchain technology, has the potential to make financial transactions and processes more transparent and resilient, and at lower cost. Its application is also potentially widespread, covering areas from payments to trade finance.

One experiment by the industry involves MAS, the Singapore Exchange, banks and technology companies leveraging distributed ledger technology to create a more efficient inter-bank payment and settlement system without MAS acting as the trusted party. 

In another example, MAS and the Hong Kong Monetary Authority have agreed to use the technology to set up a cross-border platform to boost trade finance. 

The initiative, which is expected to go live in 2019, will allow users to exchange digital trade documents across borders with confidence. Its development was driven by the associations, governments and regulators on both sides.

This Singapore-Hong Kong partnership rides on Singapore’s National Trade Platform (NTP), a trade and logistics IT ecosystem connecting businesses, community systems and platforms, and government systems. The NTP is itself a collaboration involving GovTech, Singapore Customs, different government ministries and MAS.

4. Driving the e-payments agenda. To execute on the vision of an e-payments society in Singapore, there needs to be greater collaboration within the payments industry. Today, we have multiple e-payments solutions and limited interoperability among them.

To address this, in August 2017, MAS launched a 20-member payments council, comprising not only representatives from banks, but also payments providers, non-traditional players such as Grab and Lazada, and trade associations. This underlines, once again, a collaborative effort across businesses and industries to shape the payments landscape in Singapore.

The creation of PayNow and the SGQR (a common QR standard for point of sale payments in Singapore) are outcomes of this initiative, and are set to transform the payments landscape in the country by the end of this year.

STRONG PEOPLE FOCUS AND SKILLS AGENDA

Finally, an effective ITM needs to have a strong people focus and agenda. Digitalisation in the financial industry is fast reshaping job roles. In such an environment, skills training, re-development and job mobility take on heightened importance.

The Government has recognised that reskilling and re-tooling the workforce is not the responsibility of banks alone. A supportive national infrastructure is also helpful.

To this end, the Institute of Banking and Finance (IBF) plans to set up a career centre to provide advisory services for financial sector professionals.  This expands IBF’s mandate to cover not just the setting of competency standards and promoting skills development, but also career advisory, job matching and placements. 

In short, to be successful, an ITM needs to have broad-scale industry participation, iconic projects which move the needle and a strong people focus.

The financial services ITM is an exemplar one that checks all these boxes, and is a fitting role model for other industry transformation roadmaps.

Piyush Gupta is CEO of DBS Bank.

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